Seasons in the sun prove a big winner for TUI in a sell-out summer

By DOMINIC JEFF
Published on 27/09/2012 22:22

HOLIDAYS giant Tui Travel enjoyed a near sell-out summer and a surge in bookings for next year as families look to escape the British weather.

The Thomson and First Choice operator said Thursday that strong trading during the height of the high season meant fewer empty seats on its flights and helped improve margins compared to last year.

Tui said: “We have fewer holidays left to sell than at this stage last year, which has allowed pricing levels to be maintained in the ‘lates’ market with strong margins.”

The group reported an “encouraging start” to trading for its winter 2012-13 getaways, with accommodation bookings up 14 per cent. Transaction values for winter holidays are already 32 per cent higher than at the same time last year.

In the UK, early bookings for summer 2013 are “significantly outperforming the market”, it said, particularly for its “exclusive” holiday ranges.

UK bookings for next summer are already up 10 per cent against the same point last year.

As well as the poor weather, a weakened euro has proved attractive for many Britons opting for short-haul destinations such as Ibiza, Majorca and Menorca.

However, the weaker euro is a double-edged sword for Tui as the exchange rate is also affecting profits from its northern and central European markets.

France was the worst-performing market, with bookings down 26 per cent this summer as the tour operator cut back its offering to long-haul destinations from the country. It said the decline was in line with expectations.

Nick Batram, an analyst at Peel Hunt, said: “Tui continues to deliver in a tough market and without the impact of a weaker euro numbers would have been even better.

“The evolution of the product mix, together with excellent execution, leaves the group well placed to continue to outperform its competitors.”

Earlier in the summer, Tui claimed to be winning a larger share of the European holiday market, thanks to its strongly-branded exclusive packages and the well-publicised problems at rival Thomas Cook. But it still saw sales decline in the three months to June.

Chief executive Peter Long yesterday said the company was “very pleased” with its summer performance as it benefits from strong demand for products such as its “Thomson Sensatori” resorts, which are aimed at the high end of the market.

He said: “Our continued outperformance in a challenging macroeconomic environment demonstrates our robust strategy is delivering clear results.”

The firm said that it remained on track to meet expectations for the financial year ending this weekend. Numis Securities has forecast that pre-tax profits will rise by £9 million to £369m.

Numis analyst Wyn Ellis added: “Tui is confident that the period of heavy restructuring is now over and that the margin outlook is improving, especially in the UK.

“These two factors will, we believe, lead to better quality earnings growth and stronger cashflow, underpinning solid dividend growth.”